In the dynamic business world, understanding the vast amounts of data generated is critical to making informed decisions and achieving sustainable growth. SKU analysis is emerging as a powerful tool for navigating this data landscape, providing valuable insights into product performance, inventory management, and overall business profitability.
SKU, or Stock Keeping Unit, is a unique identifier assigned to each product or service in an inventory system. SKU analysis involves examining SKU-related data to uncover patterns, trends, and actionable insights that can drive business success.
The process used to monitor inventory and interpret data at the SKU level to derive applicable insights is known as SKU analysis. This includes analyzing inventory levels to determine the availability of specific products or SKUs. Based on the extracted data, one can reorder the inventory. SKU analysis is an important part of catalog management.
This form of inventory analysis is also important in recognizing which products are moving slower and which are in high demand. It also looks at the profitability of various products through an analysis of their storage costs.
Through a combination of these metrics, businesses can manage their inventory more efficiently and create better profit opportunities for themselves.
The Significance of SKU Analysis
SKU analysis has great significance for businesses of all sizes and across a variety of industries. This empowers decision-makers to gain a clear understanding of their product portfolio, enabling them to increase sales, optimize inventory management, and increase customer satisfaction.
1. Increase Sales
By identifying best-selling and high-margin products, businesses can focus on marketing and sales efforts. The best point is that this analysis tells you which items are selling best on the market. That’s what you can focus on to maximize overall revenue and profitability.
2. Optimize Inventory Management
SKU analysis helps businesses identify slow-moving or out-of-stock items, allowing you to adjust inventory levels, reduce carrying costs, and prevent unnecessary expenses. With regular data monitoring and analysis, you can achieve a more planned and neat work organization.
3. Increase Customer Satisfaction
By understanding customer preferences and identifying products with high customer satisfaction ratings, you can adjust your product offerings to meet customer demand. This will ultimately lead to increased loyalty and positive customer experiences.
More than its significance, you can get quite a lot of benefits, especially in terms of its importance for your business growth.
1. Helps Manage Product Proliferation
To achieve this level of business growth, you need to keep moving with your product. Whether it’s the introduction of a new product or adding variations to an old product. SKU analysis plays an important role in this case to help product proliferation. This will control the risk of loss for your company which is usually caused by storage management.
Investing in SKU analysis allows you to stay strategic about the products you introduce into the supply chain. Additionally, it allows you to identify your best-selling items and work on improving and expanding your stock of those items. Additionally, SKU analysis is also an important part of understanding your audience and driving your product development efforts.
2. Monitor Product Performance across Multiple Channels
SKU analysis is an important tool for understanding product and customer performance. By analyzing SKU data, you can identify products that are performing well and products that need improvement. This information can be used to develop more effective distribution and marketing strategies, as well as increase customer satisfaction.
3. Clearer Cost Analysis
SKU analysis will help you identify some invisible costs. Many businesses only look at costs related to shipping, software, and advertising. In fact, you also need to take into account store maintenance, overhead costs, and market costs. The market has its own costs, and keeping track of the numbers mentioned above can be beneficial in helping you reduce losses on each sale.
All expenditure needs will be recorded in SKU analysis which allows you to manage them better. You can also use these notes to analyze lower-cost products or supply alternatives with similar performance.
4. Measure ROI and Improve Investment Decisions
SKU analysis can be very useful in helping you redistribute funds and create a more profitable marketing strategy. Without good recording, you could miss points which will later become the starting point of your losses.
With the right SKU management plan, you can eliminate these losses by tracking products that don’t generate revenue. You can follow up on these findings to stop production or create a new plan to increase sales of the product.
Steps to Conduct SKU Analysis
SKU analysis is a comprehensive process that involves collecting, analyzing, and interpreting SKU-related data. It usually follows these steps.
1. Data collection
The first step involves collecting SKU data from various sources, including sales records, inventory management systems, and customer relationship management (CRM) software. Important data points include product name, SKU, category, price, inventory levels, sales volume, revenue, and gross profit margin.
2. Data Planning
The data collected needs to be cleaned and organized to ensure its accuracy and consistency. This may involve handling missing values, correcting data inconsistencies, and combining data from multiple sources.
3. Data Analysis
Using appropriate data analysis techniques, the prepared data is examined to reveal patterns, trends, and insights. Commonly used analytical methods include:
- Sales Analysis
This involves examining sales trends by product, category, and time period to identify best-selling items, seasonal patterns, and areas for improvement.
- Cost Analysis
By analyzing product costs and profit margins, businesses can identify products with high-profit margins and areas where cost reductions can be implemented.
- Customer Satisfaction Analysis
Analyzing customer reviews, ratings, and feedback can help businesses identify products that resonate with customers and those that need improvement.
4. Interpretation and Action
Insights derived from data analysis are carefully interpreted to identify actionable strategies to improve business performance. This may involve:
- Prioritize product development
Focus resources on developing and marketing products that have demonstrated high sales and profitability potential.
- Optimize inventory levels
Adjust inventory levels to ensure optimal stock availability for high-demand items while minimizing carrying costs for slow-moving items.
- Increase product offerings
Modify existing products or introduce new ones based on customer feedback and market trends.
SKU analysis serves as a powerful tool for businesses to gain a holistic understanding of their product portfolio, enabling them to make informed decisions that drive sales, optimize inventory management, and increase customer satisfaction. By adopting SKU analysis as a routine practice, businesses can navigate the dynamic data landscape and achieve sustainable growth.
Here are some additional tips for conducting effective SKU analysis:
- Use reliable data analysis software to help you collect, analyze, and interpret your SKU data.
- Work closely with your team to ensure that you are on the same page about the goals of your SKU analysis.
- Create clear and concise SKU analysis reports that your business stakeholders can easily understand.
By following these tips, you can increase your chances of success with SKU analysis. Please visit our blog to read other articles about product management and storage. If you want to do an SKU analysis, we can help you. Learn more here!